Road Funding Review

There’s been quite a bit of discussion about the franchise fee in Ramsey, and a few folks have expressed their opposition very loudly. I wanted to take some time to explain my position, and why the residents I’ve discussed this with are in support of the way we’ll be funding our roads.

History

Five years ago, the Council discussed using either an assessment model or a franchise fee model to fund our roads. At the time, some members of the Charter Commission were against the franchise fee, and put forth an amendment that, if passed, would have severely limited its effectiveness. Because I didn’t want to limit the choices of future council members, I opposed the amendment as it stood, and was quoted in the paper about my position.

In the end, my colleagues and I decided the best course of actions was to use the assessment model, and the Charter Commission’s amendment was never voted on.

Fast forward to 2020 – With the support of our current Council and the Charter Commission, the City of Ramsey partnered with the University of Minnesota Resilient Communities Program to study how other cities utilize franchise fees.

The Council reviewed the study as well as many other data points and input from residents, and found the assessment model not to be cost effective. The Council voted to move forward using the franchise fee for road funding. The Council stipulated a five year sunset, and that the money could only be used for road maintenance and repair.

Some members of the Charter Commission brought back the franchise fee amendment that was discussed in 2014. After much discussion, they voted 5 to 3 not to amend the charter.

Road Funding Options

There are three options available to city governments to fund roads. They are:

  1. a 100% property tax
  2. a 25% assessment model, or
  3. a franchise fee

Ramsey used the 25% assessment model for the past 5 years, and here are some of my thoughts about its effectiveness.

  • Under the assessment model, the city had to borrow money, then pay that money back over 10 years with interest. This is a net loss for the city budget.
  • Under the assessment model, there was a 5% fee paid to set up the bond sale. Another net loss for the city.
  • City engineers had to prepare estimated costs for the road projects to be worked on. Once the city identified its cost share, an assessment on residents was forecast. At this point, residents could petition to stop a project if they did not want to pay the cost. Two projects were cancelled using this method, resulting in over $28,000 of lost staff time.
  • When the city made an assessment, the assessment could not be greater than the improved value added by the new road. So, an outside firm would be hired to appraise the values of homes, adding more cost, and then those appraisals could be challenged in court, adding even more time and cost.
  • The 25% assessment model hits our residents hard. For example, I received a call from a young family that had just moved to Ramsey and were unaware they would be charged $6,000+ because of construction on their street. Likewise, a retired couple on a fixed income was dismayed to find out they had to pay thousands of dollars above what they had budgeted for.

These examples illustrate why the 25% assessment model was in my opinion not the best option for residents.

The City Council has spent the last 5 years researching road funding, talking with consultants, and meeting with officials from surrounding cities. We have held public hearings and open houses to educate Ramsey residents about why the 25% assessment model is more expensive, and how moving to a franchise fee would be good for the city.

Why the franchise fee is beneficial

  • It makes budgeting for road improvements much easier.
  • There are no assessments needed.
  • Money is collected up front, so the city doesn’t need to pay interest on bonds.
  • City engineers can plan projects knowing there is a stable funding source, without worry that their hours of planning will be wasted by a stopped project.
  • The franchise fee funds are dedicated to road maintenance and repair.
  • The cost for residents is $14 a month (split evenly between gas and electric utility bills) or $168 per year, which makes family budgeting easier.
  • The franchise fee has a five year sunset and will be reviewed by council.
  • The City has implemented a rebate system for those who have paid assessments in the last 5 years.

Regarding Property Tax Deductibility

After the 2017 Tax Cuts and Jobs Act (TCJA) raised the standard deduction, the Tax Foundation estimates that only 13.7% of all taxpayers will continue to itemize their tax deductions. In addition, the deduction for state and local taxes is now capped at $10,000 which makes it less likely that an increase in property taxes will actually be deductible. Even for those taxpayers who do itemize, the lower tax rates mean that there is less benefit from itemized deductions.

In short, a minority of taxpayers now itemize their taxes. Of those who do, even fewer can take advantage of an increase in property taxes and even then, the benefit is small.

In conclusion

It seems to me that using the franchise fee method is a far better approach for funding our roads than the assessment model, and a majority of the constituents I’ve spoken with agree. There is a clear choice in this election as to who to vote for. To me, experience counts. Do not be fooled if you think my opponent can shift money from other areas of the budget to pay for roads. Whether through the old system of bonding and interest payments, or the new franchise fee, the residents are the ones paying the bill. I believe the franchise fee is the much more conservative approach to achieve this.

If you would like to discuss this further, please reach out to me and I’d be happy to discuss this with you. My phone number is 612-965-3780.

Whether you vote by mail or in person, I hope I can count on your support on November 3rd.

Franchise Fee language upheld by Charter Commission

The Ramsey Charter Commission held a meeting on Thursday, August 27th, and on the agenda was an amendment to severely limit the city’s use of the franchise fees. The Commissioners voted after much debate, and the amendment failed on a 5 to 3 vote.

I would like to applaud those Charter Commission members who saw through the weak argument of the amendment and voted for keeping the charter language as is.

Some people running for office this year are trying to argue that the Ramsey City Council has not prioritized our roads. I find this confusing, because a Road Pavement Plan has been in place for the last 5 years. In addition, the city’s Capital Improvement Plan details future road improvements through 2029.

Because of the action we took in starting the franchise fee, the city now has a stable funding source for road maintenance and repair. The new system has many advantages:

  • Eliminates costly assessments on families that can least afford them
  • Availability of a franchise fee rebate program for those who paid assessments in the last 5 years
  • Eliminates interest on road funding bonds
  • Allows projects planned by city engineers to proceed on schedule
  • Has a 5 year sunset in place for the council to review

I believe in this plan because it is fair for all Ramsey residents. As I’ve said before, your support is an investment in our shared future, and I humbly ask for your vote on November 3rd.

If you would like to vote by mail, you can receive your ballot by visiting mnvotes.org or calling 763-324-1300.

Ramsey Road Pavement Management Program

I'd like to address the comments being made about the conditions of our roads. Some candidates are implying that the current council has not adequately funded our road maintenance, when in fact nothing could be further from the truth.

Ramsey has 180 miles of roads, and they are one of our biggest assets. Because of their importance, the council implemented a 5 year Pavement Management Program that started in 2015. This program provided $500,000 per year for crackseal, sealcoat, and overlay projects. In addition, the city allocated another $8.78 million worth of projects above and beyond the per year spending by bonding, assessments, MSA funds, and other sources. If you would like to read about the complete spending breakdown of this 5 year project, you can find the details on the City of Ramsey 2015-2019 Pavement Management Program Summary.

Moving forward, the Council has included in the CIP (Capital Improvement Program) for 2020-2029 an updated Pavement Management Program (starts on page 181). This program, which you can read on the city website, provides detailed information about where and when specific roads in our community will be improved. We will continue to spend $500,000 per year for maintenance and overlays, plus an additional $1.9 million per year with the funds generated from the franchise fee. As with all projects, the suggested improvements might change based on updated information from our city planners, who rate the roads using the Paser scale.